A targeted tax cut for multinational corporations, supporters argued, would create 500,000 jobs and spur hundreds of billions of dollars in private-sector investment at little cost to Americans.

Instead, much of the money that businesses returned to the U.S. from abroad during the last repatriation “tax holiday,” in 2004 and 2005, was paid out to shareholders, economists said.

Some firms laid off workers at the same time they shaved hundreds of millions from their tax bills.

Now, multinational corporations are about to seek another tax break on the estimated $1 trillion they have parked in overseas accounts.

But numerous economists told POLITICO that lawmakers should heed the lessons of seven years ago. They said a tax holiday would be a small but arguably still worthwhile boost to the economy that mostly benefits big corporations and their shareholders.

“I think we need to be honest about what type of effects it would have,” said C. Fritz Foley, a Harvard Business School finance professor who co-wrote a 2009 analysis of the most recent repatriation holiday.

“Last time, it was sold in a way that wasn’t consistent with how companies behaved once the tax holiday was approved,” Foley said. “People said the money brought back would be used for capital expenditures and to hire more people. Instead, most of it was used for stock repurchases.”

That’s not to say it wouldn’t be worth doing again, Foley added. “It still stimulates the economy to some degree, just not in the way it was sold. It was called the American Jobs Creation Act, not the American Stock Repurchase Act.”

The debate over repatriation is about to heat up again. Rep. Brian Bilbray (R-Calif.) plans to unveil legislation Friday granting another one-year tax holiday on repatriated earnings. Sen. Barbara Boxer (D-Calif.), who led both the successful 2004 repatriation effort and a failed attempt in 2009, has signaled she’s ready to try again. And fueling those efforts is a coalition of tech, pharmaceutical and energy companies about to launch a campaign on Capitol Hill for the idea.

But as Congress takes up the issue, experts say it’s worth considering what happened in 2004. Normally, multinationals pay a 35 percent tax rate on overseas profits that they repatriate to the U.S., though the effective rate is often in the mid-20s after deductions and credits. The 2004 act lowered the rate on repatriated funds to 5.25 percent for one year.

In one respect, proponents’ bullish predictions about what would happen came true: Corporations brought lots of cash back. Some $312 billion was repatriated, according to IRS data.

But despite a requirement in the law that the money be used for domestic investment, a series of studies showed that, by and large, it was not. Foley’s analysis found an increase in shareholder payouts from 60 cents to 92 cents for every dollar that was repatriated.

Companies were able to skirt the rules by shifting cash around, experts said. “Money is so fungible that it makes it very hard to give those regulations any bite,” Foley said.

The benefits of the repatriation break accrued to a small number of very large corporations. A Congressional Research Service report released in December found that five firms — Pfizer, Merck, Hewlett-Packard, Johnson & Johnson and IBM — accounted for 28 percent of the money that was repatriated during the 2004 tax holiday.

The top 15 firms — adding Schering-Plough, DuPont, Bristol-Myers Squibb, Eli Lilly, PepsiCo, Procter & Gamble, Intel, Coca-Cola, Altria and Motorola — accounted for 52 percent of all repatriated funds. Altogether, 843 of the 9,700 firms eligible to return foreign profits at the lower rate did so, with the pharmaceutical and medicine industry making up 32 percent of the total and computer and equipment firms accounting for 18 percent.

Some of the firms shed jobs even as they brought home tens of billions of dollars, the CRS report said. Pfizer repatriated $37 billion but reduced its work force by 10,000 jobs in 2005-06; Hewlett-Packard, which was going through a massive restructuring after its merger with Compaq, repatriated $14.5 billion but laid off 14,500 employees.

Corporations said the 2004 tax holiday has gotten a bad rap, pointing to instances in which the money was used for hiring and investment. Intel said the money it returned helped build new chip fabrication plants, for example, and Cisco said the $1.2 billion it repatriated helped fund 1,200 new engineering jobs in the U.S.

Meanwhile, a 2009 analysis by economist and former U.S. Undersecretary of Commerce Robert Shapiro found the repatriated funds “freed up” nearly $150 billion for capital spending and new hires. What’s impossible to know, other economists counter, is whether the bulk of that spending would’ve happened anyway.

But the preponderance of evidence shows that shareholders were the biggest beneficiaries. The debate now, economists said, should be whether that’s reason enough to give the corporations another tax break.

Economist Allen Sinai, a vocal champion of the 2004 holiday who advocated for a repeat tax break in 2009, told POLITICO he’s less bullish on the idea now. He and other experts said the rationale for it was stronger in 2009, when corporations had credit-access issues and genuinely needed the cash.

“The case for it now is not as strong because companies are so cash rich,” said Sinai, chief global economist of Decision Economics.

His advice to Congress: Craft a repatriation tax break as a credit that corporations may use only for hiring and R&D and attach real enforcement mechanisms that “put their feet to the fire.”

Other economists argue that Congress should resist pressure from Big Business for another one-time break and hold out for comprehensive corporate tax reform. Another repatriation holiday, they said, would only encourage multinational firms to send more money and jobs abroad, knowing another break would be granted in due time.

Research indicates that’s what happened last time. A 2007 study by Sinai showed that unrepatriated earnings soared 72 percent in the three years after Congress passed the most recent holiday.

Critics argue that granting another reprieve would start the dysfunctional cycle — a brief gush of overseas cash back to the U.S., followed by years of increasing amounts of profits abroad — all over again.

“That $1 trillion abroad got there because corporations put it there. They used profit-shifting techniques to move profits offshore” to low-tax havens, said Martin Sullivan, a contributing editor for the publication Tax Notes and a former U.S. Treasury Department economist. But there is a limit to how much money U.S. multinationals can sit on abroad, he added.

“Another repatriation holiday would remove the only significant restraint on them to move more profits abroad,” Sullivan said. “The dam would be broken.”

Sullivan argued that Congress and President Barack Obama should insist on broad corporate tax reform — and use that as a chance to fix the underlying problem that causes corporations to seek a repatriation break in the first place.

Several economists interviewed by POLITICO said lawmakers should do two things to overhaul the system: Lower the 35 percent corporate rate, now the highest in the world, and close tax loopholes.

“The whole system needs to be reformed,” Sullivan said. “This Band-Aid approach makes everyone feel better for a few months but makes the problem worse over the long term.”